China Works to Stem Inflation

China's Central Bank

In an effort to learn from the mistakes of others, the Chinese government is taking steps to protect is growing economy. The recent real estate bubble in the U.S. and the devastating impact of its collapse on the American economy is a lesson learned. To stabilize its own rising inflation, China is trying to find new ways to manage its cash according to officials from China’s central bank.

According to the deputy governor Hu of the bank, “An implementation of prudent monetary policy is helpful in strengthening the management of inflationary expectations and in fending off asset bubbles.” To this end, the bank has raised their rates two times in as many months.

The strategy, according to Hu, is to remove excess cash from the Chinese financial system using its banking tools which encourage people and business to tie their cash up in a less liquid state.